New Delhi: If you have an insurance policy, the Insurance Regulatory and Development Authority of India (IRDAI) brings great news for you. If you decide to exit your life insurance policy early then you’ll receive more money back. In an effort to benefit policyholders, the IRDAI has mandated a higher special surrender value (SSV) for traditional endowment policies.
This means that even if you choose to exit your policy after just one year, you’ll get a portion of your premium refunded. This change comes after extensive discussions and proposals, ensuring that policyholders are better protected and receive fairer returns when they surrender their policies early. (Also Read: Petrol, Diesel Price Hike: Karnataka Government Raises Fuel Rates By Rs 3 Per Litre)
“While we anticipate a gross impact of approximately 100 bps on the company’s new business margin (NBM) due to higher surrender value on early exits, we are confident in our ability to largely mitigate this impact without compromising the value proposition for our customers,” an HDFC Life spokesperson said Moneycontrol. “We expect these measures to positively impact the long-term growth prospects for the industry.” (Also Read: SBI Customers, ALERT! Your Home Loan, Personal Loan EMIs To Go Up As Bank Raises Lending Rates By 10 Basis Points)
“Given that substantial number of policyholders surrender their policies in early years, this regulation would immensely benefit those policyholders in particular,” An anonymous source from a private life insurance company told Moneycontrol. “The increase will also be applicable to surrender in latter years, albeit the quantum of such increase will be comparatively lower.”
The IRDAI has announced that the special surrender value (SSV) should be at least equal to the present value of the paid-up sum assured and any future benefits, such as regular income payouts. Previously, life insurers opposed this move and argued that these products are designed for long-term goals and not for providing liquidity, according to Moneycontrol.
“Reserving will have to go up and more capital will be required,”The CEO of a leading private life insurance company told Moneycontrol. The CEO further added “The upfront charges are high and it is difficult to recoup the commissions paid in the initial years,”.
Further, the insurance regulator now requires life insurers to provide a Customer Information Sheet (CIS) to customers which is similar to what health and general insurers do. This sheet will clearly explain clauses, policy benefits, premiums, and terms and conditions in simple and concise language.
The IRDAI also allowed insurers to design a variety of new products, including index-linked plans and variable annuity payout options. The regulator introduced stricter penalties for insurers regarding customer grievances.